Warning on Economic Impact of Potential Government Shutdown
Kevin Hassett, the Director of the National Economic Council (NEC), expressed concerns on Monday about the financial repercussions that a government shutdown might have on the U.S. economy, estimating a loss of approximately $15 billion per week.
During a segment on CNBC’s “Squawk Box,” Hassett referenced an internal report from the White House, indicating that extended shutdowns could yield significant negative effects. “Friends from the Economic Advisory Council updated me over the weekend,” he noted, “they say we’re looking at around $15 billion a week in GDP loss due to shutdowns.” He further clarified, “If this shutdown drags on for too long, various things will get put on hold, and we’ll see that reflected in our GDP.”
According to the White House, a month-long shutdown could result in an additional 43,000 people losing their jobs. The report also highlighted that consumer spending could decline by $30 billion due to the direct effects on federal employees and the subsequent impact on other sectors.
Further insights from Ey-Parthenon estimated that the government closures could reduce GDP growth by $7 billion weekly, translating to a loss of about 0.1 percentage points in the fourth quarter. This decrease would stem from reductions in wages for furloughed federal workers, delays in government procurement, and a drop in overall demand.
The Congressional Budget Office (CBO) had previously estimated that the last shutdown during President Trump’s term led to an $11 billion decrease in economic output over the subsequent two quarters, including a $3 billion loss that the economy never recovered.
Moreover, the CBO recently suggested that nearly 750,000 workers could be affected by a daily shutdown, with their total earnings costing the U.S. economy roughly $400 million each day.
Despite these alarming figures, Hassett downplayed the long-term implications of a shutdown, stating that the economy is thriving. “The good news is that the economy is booming,” he remarked, citing an uptick in retail sales compared to the previous year. “I really think this government closure will just be a minor detail in the larger picture,” he added, urging Democrats to negotiate and work toward resolving the issues and reopening the government.
